Neutral Citation Number: [2017] EWCA Civ 147
Case No: A3/2015/1709
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM the high court of justice
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
Mr Justice Newey
[2015] EWHC 1276 (Ch)

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 21 March 2017
Before :

LORD JUSTICE PATTEN
LADY JUSTICE KING
and
LORD JUSTICE SIMON
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Between :

	BALBER KAUR TAKHAR	Claimant/
Respondent 	
	- and -		
	(1) GRACEFIELD DEVELOPMENTS LIMITED
(2) DR KEWAL SINGH KRISHAN
(3) MRS PARKASH KAUR KRISHAN	
Defendants/
Appellants	

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Mr John Wardell QC (instructed by Tanners Solicitors LLP) for the Claimant
Mr Avtar Khangure QC and Gavin McLeod (instructed by Gowling WLG (UK) LLP) for the Defendants

Hearing date : 1 December 2016
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Judgment Approved
Lord Justice Patten : 
Introduction
1.	On 24 October 2008 the present claimant, Mrs Balber Takhar, issued proceedings in the Birmingham District Registry of the Chancery Division in which she alleged that various properties in Coventry of which she was the owner and registered proprietor had been transferred to Gracefield Developments Limited (“Gracefield”) as a result of undue influence or other unconscionable conduct on the part of the second and third defendants, Dr and Mrs Krishan.  
2.	Mrs Takhar and Mrs Krishan are cousins.  Her case in summary was that the properties were acquired by her from her husband when they separated in 1999.  In 2004 she became re-acquainted with Mrs Krishan after not having seen her for about 30 years.  At the time Mrs Takhar was experiencing difficulties in her private life and was also in severe financial difficulties.  She says that she confided her problems in Mrs Krishan who came to exert significant influence over her.
3.	Her financial difficulties were due in large part to the properties.  There were rates arrears and many of the properties were dilapidated.  Mrs Takhar said that she was facing bankruptcy.  The Krishans provided her with financial help and Dr Krishan took over responsibility for dealing with Coventry City Council.  In November 2005 it was agreed that the properties would be transferred to Gracefield, a newly formed company, of which Mrs Takhar and the Krishans were the shareholders and directors.  
4.	There is a dispute between the parties as to the terms upon which the properties were to be transferred.  Mrs Takhar’s case was that the properties were not to be sold but would continue to belong (presumably beneficially) to her.  They would be renovated and let with the costs being recouped out of the rents.  In the short term, the expense of renovation would be met by the Krishans.  Their case was that Gracefield was set up as a joint venture company.  The properties were to be given an agreed value which would be paid to Mrs Takhar after the properties were sold and any profit over the agreed value would be split 50/50 between Mrs Takhar and the Krishans.  Their explanation of why Mrs Takhar agreed to these arrangements was that planning permission for development needed to be obtained in order to unlock the value of the properties and this was something which Dr Krishan had experience in obtaining having already successfully developed his own medical centre. 
5.	Part of Mrs Takhar’s evidence was that the properties did not really belong to her and had only been put in her name by her husband to protect them from claims by his brother with whom he was in partnership in a business called Takhar Trading Company.  The trial judge (HH Judge Purle QC) rejected this.  He also found that it was Mrs Takhar rather than Mrs Krishan who was instrumental in pressing for these arrangements as a way out of her financial difficulties.  Although under pressure, she was, he said, perfectly capable of understanding what she was doing and of exercising independent judgment.  The real issue therefore concerned the terms upon which the properties were to be transferred to Gracefield.   The venture was not risk-free for the Krishans.  They had to use their own money to restore properties that were run down and in circumstances where there was considerable public pressure for their demolition.  It was unlikely, the judge said, that they would have been prepared to do this simply in return for their expenses and then to hand the properties back to Mrs Takhar at no further cost.
6.	The judge therefore preferred the Krishans’ account of what had been agreed.  A significant piece of evidence was a joint venture agreement dated 1 April 2006 which the judge said was a true reflection of what was agreed between the parties orally in and following November 2005.  The agreement provided for a purchase price of £100,000 which was to be placed on a loan account with Gracefield and for further sums totalling £200,000 as deferred consideration.  The total of £300,000 was to be paid to Mrs Takhar on completion of the sale of the properties by Gracefield together with 50% of the profits on the sale of each property.  The judge found that Mrs Takhar therefore transferred the properties to Gracefield for a price of £300,000 plus 50% of the profits on re-sale which he said was not shown by expert evidence to be an insufficient price and was for her a fair return.  More to the point, it was, he said, what she had agreed as evidenced by the joint venture agreement.  
7.	The joint venture agreement, although dated 1 April 2006, was signed later.  There was no original of the document signed by Mrs Takhar.  The evidence of the Krishans was that it was prepared by accountants at a time when Mrs Takhar was in India and then handed to her when she returned.  She was asked to consider it and return it to the accountants to deal with.  Mrs Takhar’s case was that she did not sign the document and had never seen it until the dispute arose. 
8.	The judge said:
“However, no case of forgery is advanced.  Only the last page of the version of the agreement signed by Mrs Takhar appears to have survived and that is in the form of a scanned copy, which has emerged in the files of Sue Bowdler’s firm.  It was misfiled, apparently.  Sue Bowdler had not seen the copy with Mrs Takhar’s signature on it before until it was found, misfiled.  However, there is no doubt that the agreement was prepared for signature.  There is no doubt also that the agreement was prepared for signature in or around April 2006 and there is no doubt, in my mind, that it faithfully reflects the oral agreement that had been made.
22. In the absence of Mrs Takhar giving a coherent explanation as to how her signature came to be on the scanned copy, I conclude that the Krishans’ evidence, which I believe anyway, should be accepted and that Mrs Takhar took the copy of the agreement that she was to sign away, which was returned, probably by her in some way, duly executed to Sue Bowdler’s firm, which then ended up misfiled.  At all events, I am satisfied that that was the agreement that was made.  The properties were transferred by Mrs Takhar in to Gracefield’s name before the written joint venture agreement was prepared, and the only credible explanation that I have heard is that they were so transferred on the terms subsequently set out in the joint venture agreement, which were previously agreed orally.” 
9.	In March 2008, when the properties were put up for sale by Gracefield, Mrs Takhar objected.  The judge summarises what then happened in [29]-[30] of his judgment:
“29. Following the objections that Mrs Takhar raised to the sale, she obtained the services of a Mr Matthews who looked into the history and suspected fraud.  The Krishans claimed at that stage to have invested well over half a million pounds of their own money and appeared to be saying that Mrs Takhar could go back to square one if she wished but she would have to pay off all the Krishans' costs which included the sum of, as I have said, in excess of half a million pounds.  In fact, it is now said by the Krishans, that what they had in mind was that their anticipated profit share would amount to a sum in excess of half a million pounds.  However, they clearly did not say that at the time.  There were two documents, one called the Balber Takhar account, the other the Gracefield Options, which clearly misstated the position, in my judgment deliberately so, in an endeavour to put pressure on Mrs Takhar. These were unworthy and wholly inappropriate steps to take and Mr Burton pertinently asks: Why tell these lies? The only, or at least most compelling answer, he says, is because everything that Mrs Takhar previously has said is true.  The Krishans were concealing from Mrs Takhar the true purpose of the transfers.  She never regarded the properties as anything other than hers.  Nor did the Krishans, and they were put in to Gracefield merely as a shell and not because of any joint venture agreement, which is an invention.
30. However, I regard the other evidence to be too compelling.  I regard the contemporaneous evidence to point unerringly in the one direction of a beneficial transfer to Gracefield in return for a joint venture agreement, which cannot be castigated as unfair or inappropriate.  I regard the responses, which were given in April and May 2008, to Mrs Takhar's volte-face (which is what it was) to have been an exercise in frustration which, however understandable, were in truth inexcusable but did not alter the facts of the past.”
10.	The judge therefore dismissed the claim holding that the properties had been transferred to Gracefield both legally and beneficially subject to the terms of the joint venture agreement.
11.	On 20 December 2013 Mrs Takhar issued a new claim in the Chancery Division by which she seeks to have Judge Purle’s order set aside on the ground that it was obtained by fraud.  The claim is based on the evidence of Mr Robert Radley, a handwriting expert, who has produced a report dated 4 October 2013 in which he expresses the view that the 2006 joint venture agreement was never signed by Mrs Takhar.  He says that there is a letter of 24 March 2006 with an original ‘pen on paper’ signature by Mrs Takhar that is super-imposable on the signature on the joint venture agreement.  In his opinion, this is conclusive evidence that a copy of the original signature on the letter has been transposed onto the agreement. 
12.	In the particulars of claim the history of the 2008 claim is set out including extracts from the cross-examination of the defendants and other witnesses about the signing of the joint venture agreement.  This includes the evidence of the Krishans that the agreement had been handed to Mrs Takhar for signature and returned signed to the accountants and the evidence of Mrs Bowdler of the accountants that the copy signed by Mrs Takhar had been mis-filed.  In paragraph 33 it is pleaded (on the basis of Mr Radley’s report) that the claimant’s purported signature on the agreement has been forged together with her signature on various ISU Accountant Enquiry Forms.  The Court is invited to infer that the defendants were responsible for the forgery of the joint venture agreement.
13.	On this basis it is claimed that had Judge Purle been aware of the forgery he would not have found that the joint venture agreement had been prepared for signature in around April 2006 and would have rejected the defendants’ case that it represented what had been agreed in November 2005 about the profit sharing arrangements.  It would also have confirmed the findings which the judge did make about the creation of false documents by the defendants in the form of the Balber Takhar account and the Gracefield Options (see [9] above) and would have established a pattern of deceitful behaviour on the defendants’ part.
14.	Mrs Takhar is not able of course, nor is it the purpose of the 2013 action, to invite the Court at trial to find that the properties were transferred to Gracefield upon the terms which she alleges.  That would be a matter for a new trial in the 2008 action at which the judge would have to consider all the evidence including the fact that Mrs Takhar had not signed the April 2006 agreement and (if proved) that the Krishans had forged her signature and given false evidence to the Court about Mrs Takhar’s agreement to its terms.
15.	The sole purpose of the 2013 action is to set aside Judge Purle’s order on the basis that it was procured by false evidence which was material to his conclusions about what had been agreed in November 2005.
16.	The defendants served defences to the claim in which they pleaded that the claim should be struck out as an abuse of process.  They said that the Radley Report was based on documents that have been available to the claimant since at least 13 July 2009 (about 12 months before the trial of the first claim); that there had been no attempt to inspect the originals of the documents; and that an application to adduce expert evidence from a graphologist was dismissed by the judge on 9 April 2010 and not appealed.  They also dispute whether the evidence that Mrs Takhar had signed the joint venture agreement was determinative of the original claim.  They say that the judge would have reached the same conclusion in the light of the other evidence.  The defendants deny in any event that they were responsible for the forgery of Mrs Takhar’s signature. 
17.	The claimant applied for permission to amend the particulars of claim in the 2013 action by adding a claim for damages against the Krishans for conspiracy and deceit in relation to the transfer of the properties to Gracefield.  Master Bragge directed the trial of a preliminary issue as to whether Mrs Takhar’s claim (both as currently pleaded and as proposed to be amended) amounts to an abuse of process.  
18.	On 6 May 2013 Newey J refused permission to amend on the grounds that the new claim for conspiracy/deceit was time-barred but held that the 2013 action did not amount to an abuse of process and should be allowed to proceed to trial.  The defendants now appeal against the judge’s refusal to strike out the action.  There is no appeal by the claimant against the judge’s refusal of leave to amend so that the issue of abuse is confined to the existing claim which, as explained, seeks to set aside the order of Judge Purle on the basis that it was procured by fraud. 
19.	Before I come to the issues which arise in relation to abuse of process, it is helpful if I set out in summary the explanation which Mrs Takhar provided to Newey J of the reasons why the allegation of forgery was not raised until after the trial of the 2008 claim and why no expert evidence equivalent to that of Mr Radley was available at the trial.  
20.	The judge has conveniently summarised the relevant history in [15]-[22] of his judgment:
“15. The Krishans served their list of documents in the 2008 Proceedings on 13 July 2009. The list included the Profit Share Agreement and an account enquiry form, and in October 2009 Challinors, Mrs Takhar’s then solicitors, asked to inspect the originals of these documents. Challinors explained in their letter:
“Whilst our client’s case is such that she acknowledges she has signed a number of documents albeit subject to the undue influence of the Defendants, there now appears to be three documents where our client has instructed us that she cannot be sure that the said documents contain her signature.”
16. Wragge & Co replied on the Krishans’ behalf that they did not hold the originals. In the event, a copy of a signed version of the Profit Share Agreement does not seem to have been produced until it was exhibited to Dr Krishan’s witness statement of 15 December 2009.
17. Mrs Takhar made a witness statement of her own on 16 December 2009. She said this in her statement about the Profit Share Agreement:
“I do not know anything of [the Profit Share Agreement] beyond reference to it in these proceedings. I had not seen it before the proceedings. I do not recollect signing it or being asked to. I do not have a copy nor have I ever. In summary there was never any such agreement discussed or agreed with me. It was not mentioned to me by [Mrs Krishan] or [Dr Krishan] on any occasion we were together or by any other form of communication.”
As regards account enquiry forms, Mrs Takhar said:
“I have been shown by my Solicitors an ‘account enquiry form’ from NatWest which appears to have my signature upon it…. I do not recollect signing the document but it may well have been one of the many documents I have been asked to sign during my time with [the Krishans].”
Elsewhere in her statement, Mrs Takhar said:
“I was frightened at the prospect of losing the Properties. I just signed what I was told to. I was constantly told that I needed to sign documents and the consequences were spelt out if I did not sign, but said in a caring way.”
18. On 31 March 2010, Mrs Takhar applied for permission to adduce handwriting (and also forensic linguistic) evidence. The application was supported by a witness statement from a Mr Chauhan of Challinors. The statement explained that Mrs Takhar’s case was that “she was directed to sign a number of letters and documents by the [Krishans] for administrative convenience to assist [them]” but she had a “genuine concern” that the signatures on several documents, including an account enquiry form, “were not hers and could potentially have been forged”. Mrs Takhar also, Mr Chauhan said, wished to examine her original signature on the Profit Share Agreement.
19. The application was unsuccessful. An attendance note records that Judge Purle “felt the instruction of a handwriting analysis and a forensic linguistic would not assist the Court a great deal and also the timing of the application considering the number of witnesses that would be required at trial is late”.
20. The transcripts of the trial include an exchange between Judge Purle and counsel about handwriting evidence:
“THE JUDGE:   Why did they want a handwriting expert? I cannot remember.
[COUNSEL FOR THE KRISHANS]:   At the time, the position of Mrs Takhar was that she had not signed some of these documents.
[COUNSEL FOR MRS TAKHAR]:   Well, she could not remember. My lord, if you remember, one of the reasons that it failed–
THE JUDGE:   Yes, I do remember now that she could not remember.
[COUNSEL FOR MRS TAKHAR]:   Yes. She has never said for sure. That is one of the reasons why it failed.
…
THE JUDGE:   That was one of my reasons, was it not? There is no positive case asserted.
[COUNSEL FOR MRS TAKHAR]:   My lord, yes. Yes, indeed.”
21. After Mrs Takhar had given her oral evidence, Mr Avtar Khangure QC (who appeared for the Krishans at the trial as well as before me) said at one point:
“my lord may recall that there was some debate at that stage as to the true construction of the [Profit Share Agreement] and we say the parties entered into and, from her cross-examination now, Mrs Takhar accepts it is her signature on the document.”
22. The following was said during the closing submissions of Mrs Takhar’s then counsel:
“[COUNSEL FOR MRS TAKHAR]:   … The [Profit Share Agreement], my lord, is a very odd document…. Mrs Takhar is adamant that she saw it for the first time in disclosure. My lord noted in the failed application for forensic handwriting experts that Mrs Takhar had been very candid, that she had not suggested that documents had been forged when she was not able to do so, and that is one of the reasons why her application for forensic handwriting evidence failed. She said she could not remember. She may have signed it. It might be her signature. It could not be her signature but on this one it is different. This one, she says, ‘No, I did not see this’ and being the amateur sleuth that I am, I have looked at her signature on this and on others and it does look a bit suspect but we do not have forensic document examination evidence and that is that, but we do have clear evidence from Mrs Takhar. She will not deny and allege a forged signature if she does not feel she is entitled to. She says she saw this for the first time. It is highly believable.
…
THE JUDGE:   Your case is that your client did not sign anything?
[COUNSEL FOR MRS TAKHAR]:   Did not sign anything, yes. I know. My lord, I am bound by Mrs Takhar’s evidence. Her evidence is that this is the first time she saw it. I have not put things to the Krishans I did not feel entitled to put.
THE JUDGE:   Well, you are not bound by her evidence. You are entitled to say she cannot remember it.
[COUNSEL FOR MRS TAKHAR]:   Yes. That is what she said.
THE JUDGE:   Assuming that she has forgotten it, then what?
[COUNSEL FOR MRS TAKHAR]:   Well, happily, it is not a problem for her case because, as you rightly identified, if she was willing to sign the TR1s, she–
THE JUDGE:   No. If she has forgotten it, then you say it is just another example of signing whatever is put before her without reading it.
[COUNSEL FOR MRS TAKHAR]:   My lord, it is but it just seems so odd….”
21.	In her witness statement prepared for the preliminary issue Mrs Takhar said:
“It was only after the trial had ended that my son went through the exercise of comparing the signature on the Profit Share Agreement with what he knew to be genuine signatures of mine on documents in the trial bundles.  This led him to discover the precise match between my signature on the 24 March 2006 letter and the Profit Share Agreement.  Prior to this discovery, it was not open to me to allege forgery and a handwriting expert at the trial would not have helped me as he would not have been able to say that it was not my signature.  However, as soon as the match had been spotted, I was able to instruct my solicitors to engage Mr Robert Radley, Forensic Document Examiner, to give his expert opinion on this key signature as well as other questionable documents.  I believe Mr Radley was first approached about this as early as September 2011.”
22.	One of the issues raised in relation to the amendment application was the date when Mrs Takhar should have become aware of the alleged fraud.  It was put by the defendants at 17 March 2008 when one of the properties was offered for sale.  Mrs Takhar accepted that Mr Peter Matthews, a financial adviser acting for her, had suspected fraud in 2008.  But she says in [7] of her second witness statement:
“However, [Mr Matthews] is not a document examiner, nor an accountant, nor a valuer. He was merely a financial adviser. Whilst he had suspicions, he had no proof of fraud, as he was forced to accept in his evidence at the trial. For my part, I too was suspicious but had no proof and could not get any proof until after disclosure and receipt of a copy of the Profit Share Agreement with my signature on it together with the other suspect signatures produced by the Defendants.”
23.	In 2011 Mrs Takhar resisted some possession proceedings brought by her then solicitors, Challinors, to enforce a charge which they had taken as security for their fees.  She successfully counterclaimed for damages for negligence on the ground that the solicitors had failed in good time to procure and deploy expert evidence that was necessary for the successful prosecution of the 2008 claim.  Although Challinors denied liability, the claim was eventually settled and Mrs Takhar received £300,000.
The legal principles
24.	I can begin as the judge did with what needs to be proved in order to set aside a judgment for fraud.  It is common ground that the principles were accurately summarised by Aikens LJ in Royal Bank of Scotland plc v Highland Financial Partners LP [2013] EWCA Civ 328, [2013] 1 CLC 596 (at paragraph 106):
“There was no dispute between counsel before us on the legal principles to be applied if one party alleges that a judgment must be set aside because it was obtained by the fraud of another party. The principles are, briefly: first, there has to be a ‘conscious and deliberate dishonesty’ in relation to the relevant evidence given, or action taken, statement made or matter concealed, which is relevant to the judgment now sought to be impugned. Secondly, the relevant evidence, action, statement or concealment (performed with conscious and deliberate dishonesty) must be ‘material’. ‘Material’ means that the fresh evidence that is adduced after the first judgment has been given is such that it demonstrates that the previous relevant evidence, action, statement or concealment was an operative cause of the court's decision to give judgment in the way it did. Put another way, it must be shown that the fresh evidence would have entirely changed the way in which the first court approached and came to its decision. Thus the relevant conscious and deliberate dishonesty must be causative of the impugned judgment being obtained in the terms it was. Thirdly, the question of materiality of the fresh evidence is to be assessed by reference to its impact on the evidence supporting the original decision, not by reference to its impact on what decision might be made if the claim were to be retried on honest evidence.”
25.	Although these will be issues for the trial, the claimant contends that it is apparent from the passages in Judge Purle’s judgment that I have quoted that the judge placed considerable reliance on her signature on the joint venture agreement in deciding what had been agreed in November 2005.  She will contend that the false evidence was both material to and causative of the decision against her.  The Krishans will maintain that they were not responsible for the forgery and the presentation of the false evidence if that is what it is but Mr Khangure QC does not really dispute that the evidence of forgery, if accepted, would have been highly material to Judge Purle’s decision even if not conclusive.  But he submits that Mrs Takhar must overcome the additional hurdle of satisfying the Court that the evidence of the forgery could not reasonably have been obtained in time to be deployed at the original trial; or, to use more familiar language, that it was not available to her and could not have been discovered with reasonable diligence before the judgment was delivered in the first trial.
26.	This is an established test for the admissibility of fresh evidence for use on an appeal.  In Ladd v Marshall [1954] 1 WLR 1489 at 1491 Denning LJ set out the conditions to be satisfied where a new trial was sought on appeal on the ground that a witness had lied at the first trial:
“It is very rare that application is made to this court for a new trial on the ground that a witness has told a lie. The principles to be applied are the same as those always applied when fresh evidence is sought to be introduced. To justify the reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.
We have to apply those principles to the case where a witness comes and says: “I told a lie but nevertheless I now want to tell the truth.” It seems to me that the fresh evidence of such a witness will not as a rule satisfy the third condition. A confessed liar cannot usually be accepted as being credible. To justify the reception of the fresh evidence, some good reason must be shown why a lie was told in the first instance, and good ground given for thinking the witness will tell the truth on the second occasion. If it was proved that the witness had been bribed or coerced into telling a lie at the trial, and is now anxious to tell the truth, that would, I think, be a ground for a new trial and it would not be necessary to resort to an action to set aside the judgment on the ground of fraud. Again, if it was proved that the witness made a mistake on a most important matter and wished to put it right, and the circumstances were so well explained that his fresh evidence was presumably to be believed, then again there would be ground for a new trial: see Richardson v. Fisher.”
	Although the admission of fresh evidence is now governed by CPR 52.21(2), the Ladd v Marshall conditions remain relevant to the exercise of the Court’s discretion under the rules: see Hertfordshire Investments Ltd v Bubb [2000] 1 WLR 2318.
27.	The situation envisaged in Ladd v Marshall is one where the witness who has previously given false evidence is now prepared to tell the truth.  But in most cases, even at the appeal stage, the new evidence will not necessarily comprise the retraction of a witness’s earlier testimony and will more often comprise other evidence (as in the present case) which is said to prove that the trial judge had been lied to.  In such cases, aside from questions of credibility, the appellant will need to show that the evidence, however probative, could not with reasonable diligence have been made available at the trial.  That requirement (in the context of an appeal against the trial decision) can only be justified by reference to a need to ensure finality in litigation which is the policy driver behind all of the rules governing res judicata and abuse of process in relation to the re-litigation of claims.  Hodson LJ recognised this in Ladd v Marshall (at page 1492) where he said:
“But Mr. Beney says that R.S.C., Ord. 58, r. 4 , is wide in its terms and that there is a complete discretion in this court, which ought not to be fettered, to receive further evidence if the justice of the case requires it. But that discretion has been always exercised in the light of the maxim interest reipublicae ut sit finis litium. This seems to me to be particularly a case where one might envisage no end to litigation if people who had given evidence were allowed to come again and say “I told lies last time. I want to tell the truth now.”
A similar statement can be found in the speech of Lord Loreburn L.C. in Brown v Dean [1910] AC 373 at 374.
28.	If this is the rule to be applied in relation to the admission of fresh evidence on an appeal against an order which is said to have been procured by fraud one might suppose that it would apply with equal if not greater force in relation to a subsequent action to set the order aside for fraud.  But Mr Wardell QC for Mrs Takhar submits that there is no further condition of reasonable diligence along the lines of the Ladd v Marshall test which requires to be applied as a pre-condition to the admissibility of the evidence and that it would be wrong in principle to impose such a condition in a case of fraud.  His argument in essence is that the policy arguments in favour of finality in litigation should have no application or at least be qualified where the original order was procured by fraud and that a claimant in the position of Mrs Takhar should not be disabled from seeking to deprive the defendants of a judgment obtained (ex hypothesi) by their dishonest evidence merely on the ground that she has been at most negligent in bringing the relevant evidence to the attention of the Court.  The principles of res judicata are designed to avoid the re-litigation of the same issues between the parties and the risk of inconsistent judgments.  But in these proceedings Mrs Takhar is not seeking to re-litigate what was decided in the 2008 action.  That will be something for the judge in any new trial of the 2008 action.  She is seeking by the new action to set aside the judge’s order on grounds of the forgery which was not an issue litigated or decided in the earlier proceedings.  Whatever may be the position in a case where the alleged fraud was raised and decided in the first trial, in this case that issue is not res judicata.  
29.	Newey J accepted these submissions but to do so it was necessary for him to analyse and distinguish the authorities, many at a high level, in which what I will call the due diligence condition has been referred to and applied.  After reviewing the authorities, he concluded that there was no binding decision which required the due diligence condition to be satisfied in this case and that he was free to adopt the broad merits-based test set out by Lord Bingham in Johnson v Gore Wood [2000] UKHL 65; [2002] 2 AC 1 in deciding whether the new action was an abuse of process. 
30.	His view was that Mrs Takhar had a real prospect on the basis of the new evidence of satisfying the conditions set out in Royal Bank of Scotland plc v Highland Financial Partners LP and that, in these circumstances, it was not possible to treat her new action as an abuse of process so as to be able to strike it out at a interlocutory stage.  Mr Khangure does not challenge that part of the judge’s reasoning if the legal premise on which it is based is correct.  The appeal therefore turns on whether Newey J was right to hold that the due diligence condition did not need to be satisfied.  If he was wrong about that the case will have to be remitted back to him to decide whether Mrs Takhar can satisfy the condition. 
The earlier authorities
31.	Mr Khangure took as his starting point the principles of res judicata and the policy considerations governing abuse of process which require the parties to litigation to bring forward their whole case and not to seek subsequently to raise issues which could have been decided in that earlier litigation.  The classic statement of this principle is to be found in the judgment of Wigram V-C in Henderson v Henderson (1843) 3 Hare 100 at pages 114-116 where he says: 
“In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points on which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time … Now, undoubtedly the whole of the case made by this bill might have been adjudicated upon in the suit in Newfoundland, for it was of the very substance of the case there, and prima facie, therefore, the whole is settled. The question then is, whether the special circumstances appearing upon the face of this bill are sufficient to take the case out of the operation of the general rule.”
32.	In Virgin Atlantic Airways Ltd v Premium Aircraft Interiors UK Ltd [2013] UKSC 46; [2014] AC 160 these principles were considered in the context of an inquiry as to damages in a patent action which this Court had ordered having found the patent in suit to be valid and infringed.  The question was whether this order and the decision it embodied remained enforceable following the retrospective amendment of the patent by the European Patent Office on the ground that the relevant claims were invalid as anticipated by the prior art.  In his judgment Lord Sumption JSC rejected the suggestion that the principle stated in Henderson v Henderson should be treated exclusively as part of the law governing abuse of process and not as an application of the doctrine of res judicata:
“… Res judicata is a rule of substantive law, while abuse of process is a concept which informs the exercise of the court's procedural powers. In my view, they are distinct although overlapping legal principles with the common underlying purpose of limiting abusive and duplicative litigation. That purpose makes it necessary to qualify the absolute character of both cause of action estoppel and issue estoppel where the conduct is not abusive. As Lord Keith put it in Arnold v National Westminster Bank plc [1991] 2 AC 93, 110G, “estoppel per rem judicatam, whether cause of action estoppel or issue estoppel, is essentially concerned with preventing abuse of process”.
26. It may be said that if this is the principle it should apply equally to the one area hitherto regarded as absolute, namely cases of cause of action estoppel where it is sought to reargue a point which was raised and rejected on the earlier occasion. But this point was addressed in Arnold, and to my mind the distinction made by Lord Keith remains a compelling one. Where the existence or non-existence of a cause of action has been decided in earlier proceedings, to allow a direct challenge to the outcome, even in changed circumstances and with material not available before, offends the core policy against the re-litigation of identical claims.”
33.	In Arnold v National Westminster Bank the issue was whether a decision of Walton J about the construction of a common form of rent review clause which had been considered in other subsequent cases to have been wrongly decided, continued to bind the parties to the lease which the judge had construed.  Fresh proceedings by the landlords in which they relied upon a different construction of the rent review clause were challenged as an abuse of process on the ground of issue estoppel.  The House of Lords held that the obvious error made by Walton J constituted a special circumstance which permitted that issue to be re-litigated.  In that regard a distinction was made between issue estoppel and cause of action estoppel where the bar on re-litigation remains absolute.  Lord Keith said (at page 104):
“It is appropriate to commence by noticing the distinction between cause of action estoppel and issue estoppel. Cause of action estoppel arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the law of England, permit the latter to be re-opened. The rule in Scotland, which recognises the doctrine of res noviter veniens ad notitiam, is different: see Phosphate Sewage Co. Ltd. v. Molleson (1879) 4 App.Cas. 801, 814, per Lord Cairns L.C. There is no authority there, however, for the view that a change in the law can constitute res noviter. The principles upon which cause of action estoppel is based are expressed in the maxims nemo debet bis vexari pro una et eadem causa and interest rei publicae ut finis sit litium. Cause of action estoppel extends also to points which might have been but were not raised and decided in the earlier proceedings for the purpose of establishing or negativing the existence of a cause of action.”
34.	In relation, however, to issue estoppel the position was held to be different.  Lord Keith accepted that issue estoppel extended to cases where the point could have been but was not raised in the earlier proceedings (so recognising the application of the Henderson v Henderson principles to both cause of action and issue estoppel) but he was persuaded that in the case of issue estoppel circumstances could exist to justify an exception to the policy requirement that there should be finality in litigation:
“It was argued that there was no logical distinction between cause of action estoppel and issue estoppel and that, if the rule was absolute in the one case as regards points actually decided, so it should be in the other case. But there is room for the view that the underlying principles upon which estoppel is based, public policy and justice, have greater force in cause of action estoppel, the subject matter of the two proceedings being identical, than they do in issue estoppel, where the subject matter is different. Once it is accepted that different considerations apply to issue estoppel, it is hard to perceive any logical distinction between a point which was previously raised and decided and one which might have been but was not. Given that the further material which would have put an entirely different complexion on the point was at the earlier stage unknown to the party and could not by reasonable diligence have been discovered by him, it is hard to see why there should be a different result according to whether he decided not to take the point, thinking it hopeless, or argue it faintly without any real hope of success. In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings. One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result, as was observed by Lord Upjohn in the passage which I have quoted above from his speech in the Carl Zeiss case [1967] 1 A.C. 853, 947.”
35.	These passages in Lord Keith’s speech in Arnold were affirmed by the Supreme Court in Virgin Atlantic and have to be treated as settled law so far as this Court is concerned.  It is therefore clear that even in a case of issue estoppel the point cannot be re-litigated unless the new material could not with due diligence have been produced at the earlier hearing: see Lord Sumption at [22].  It follows that Mrs Takhar would not be able to re-litigate the issue of the terms of the November 2005 agreement unless she can rely on evidence that she could not with due diligence have produced at the trial. 
36.	The defendants’ case is that this principle is equally applicable whether or not the new material relied on is evidence of forgery or fraud.  It still has to satisfy the Arnold test based on reasonable diligence.  For this Mr Khangure relies on the decision of the House of Lords in Hunter v Chief Constable of the West Midlands [1982] AC 529.  This was concerned with whether actions for assault brought against the police by the six men convicted of the Birmingham public house bombings in 1974 should be struck out as an abuse of process because they were based on allegations which had been made and rejected at their criminal trial.  In support of their actions the men relied on new forensic evidence which was said to confirm that they had been injured prior to their arrival at Winson Green Prison.  Lord Diplock identified the potential abuse of process as the initiation of court proceedings for the purpose of mounting a collateral attack upon the final decision of another court of competent jurisdiction.  It was not a case of issue estoppel.  The question, as on this appeal, was whether the appellant’s reliance on the new forensic evidence created an exception to the rule of public policy which deems collateral attacks on the prior decision to be an abuse of process.  At page 545 Lord Diplock said:
“There remains to be considered the circumstances in which the existence at the commencement of the civil action of 'fresh evidence' obtained since the criminal trial and the probative weight of such evidence justify making an exception to the general rule of public policy that the use of civil actions to initiate collateral attacks on final decisions against the intending plaintiff by criminal courts of competent jurisdiction should be treated as an abuse of the process of the court.
I can deal with this very shortly, for I find myself in full agreement with the judgment of Goff L.J. He points out that on this aspect of the case Hunter and the other Birmingham Bombers fail in limine because the so-called 'fresh evidence' on which they seek to rely in the civil action was available at the trial or could by reasonable diligence have been obtained then. He examines also the two suggested tests as to the character of fresh evidence which would justify departing from the general policy by permitting the plaintiff to challenge a previous final decision against him by a court of competent jurisdiction, and he adopts as the proper test that laid down by Earl Cairns L.C. in Phosphate Sewage Co. Ltd. v. Molleson (1879) 4 App.Cas. 801, 814, namely that the new evidence must be such as 'entirely changes the aspect of the case.' This is perhaps a little stronger than that suggested by Denning L.J. in Ladd v. Marshall [1954] 1 W.L.R. 1489, 1491 as justifying the reception of fresh evidence by the Court of Appeal in a civil action, viz., that the evidence '... would probably have an important influence on the result of the case, though it need not be decisive; ...' 
The latter test, however, is applicable where the proper course to upset the decision of a court of first instance is being taken, that is to say, by appealing to a court with jurisdiction to hear appeals from the first-instance court and whose procedure, like that of the Court of Appeal (Civil Division), is by way of a rehearing. I agree with Goff L.J. that in the case of collateral attack in a court of coordinate jurisdiction the more rigorous test laid down by Earl Cairns is appropriate.”
37.	It seems to me that Mr Wardell is right in his submission that the obstacle faced by Mrs Takhar is not one of issue estoppel.  As already explained, she is not seeking in the present proceedings to re-litigate the issue of what was agreed in November 2005.  Without the new evidence that would in any event be hopeless.  Nor is she challenging an earlier decision of the judge about the authenticity of the joint venture agreement.  The allegation about her signature being forged was not raised or decided at the trial of the 2008 action.  The new action is simply the procedural means which she must use in order to set Judge Purle’s order aside on grounds of fraud.  If she succeeds in doing that then the issues of profit sharing will fall to be decided de novo at a new trial of her 2008 claim.  But although we are not therefore concerned with a question of res judicata in the strict sense of issue or cause of action estoppel, we are concerned with the wider policy considerations embodied in the rule in Henderson v Henderson which, as Lord Sumption explained, is both part of and the background to the rules governing the doctrine of res judicata.  Those policy considerations are engaged, as the decisions in Hunter and Ladd v Marshall illustrate, whenever a litigant seeks to challenge an earlier decision of a competent court, whether directly or indirectly, by commencing new proceedings in which the same issues arise or seeks directly by way of appeal to challenge the judge’s decision on the basis of new evidence.  If the challenge, as in this case, is by way of an action seeking to set the judge’s order aside on the ground that it was obtained by fraud the real question therefore is whether this amounts to an abuse of process if the success of the action depends upon evidence which could with reasonable diligence have been produced at the earlier trial. 
38.	The issue of whether new evidence which could be said to undermine the findings made by the judge in the earlier trial was a sufficient basis for allowing a matter to be re-litigated arose in Phosphate Sewage Co. Ltd v Molleson (1879) 4 App.Cas. 801; a decision of the House of Lords on a Scottish appeal which is referred to in the speeches in Hunter and Arnold.  The case centred on an attempt by a company to lodge a claim in a Scottish bankruptcy for repayment of the sum of £65,000 which the company had paid to the bankrupt under a contract of sale that had been induced by fraud.  An earlier claim for the monies had been rejected by the trustee but the company had subsequently obtained further evidence of the fraud which it had deployed in proceedings in the Chancery Division in England and on the basis of which the Vice-Chancellor had made a decree rescinding the contract of sale and ordering repayment of the purchase price.  The company then proceeded to lodge a new claim in the Scottish bankruptcy which was met with a plea of res judicata.  The House of Lords held that the new allegations of fraud were based on facts within the company’s knowledge at the time of the first proof so that the plea of res judicata succeeded.  Earl Cairns LC said:
“Now, my Lords, these being the facts of the case, my first observation is this. As I understand the law with regard to res judicata, it is not the case, and it would be intolerable if it were the case, that a party who has been unsuccessful in a litigation can be allowed to re-open that litigation merely by saying, that since the former litigation there is another fact going exactly in the same direction with the facts stated before, leading up to the same relief which I asked for before, but it being in addition to the facts which I have mentioned, it ought now to be allowed to be the foundation of a new litigation, and I should be allowed to commence a new litigation merely upon the allegation of this additional fact. My Lords, the only way in which that could possibly be admitted would be if the litigant were prepared to say, I will shew you that this is a fact which entirely changes the aspect of the case, and I will shew you further that it was not, and could not by reasonable diligence have been, ascertained by me before.”
39.	As a statement of principle this was expressed in relation to a plea of res judicata and that is how it was treated by Lord Keith in the passage from his speech in Arnold (at page 104) which I quoted earlier.  But in Hunter Lord Diplock suggests that it is also relevant more generally as a statement of the conditions which must be satisfied to justify a departure from the policy of not permitting a party to challenge prior decisions by a court of competent jurisdiction in which case it is relevant to whether it would be an abuse of process to seek to set a judgment aside without satisfying the reasonable diligence condition.  
40.	In Boswell v Coaks (No.2) (1894) 6 R. 167 the House of Lords was again concerned with an action seeking to set aside a judgment of the House of Lords in 1886 on the ground that it had been obtained by the fraudulent suppression of evidence.  The Earl of Selborne treated it as an issue of res judicata but concluded that the action failed because the new evidence lacked any probative value.  He did, however, say (at page 174) that a relevant question was whether the evidence had been “newly discovered” by the plaintiff.  The point was not, however, in issue nor is there any reference to the reasonable diligence condition.  Mr Khangure accepted that it is not of much assistance either way.  But in Owens Bank Ltd v Etoile Commerciale S.A. [1995] 1 WLR 44, a decision of the Privy Council, Lord Templeman said (at page 48):
“An English judgment is impeachable in an English court on the ground that the first judgment was obtained by fraud but only by the production and establishment of evidence newly discovered since the trial and not reasonably discoverable before the trial: see Boswell v. Coaks (No. 2) (1894) 86 L.T. 365n.”
41.	The appeal in Owens Bank Ltd v Etoile Commerciale S.A. concerned a decision of the Court of Appeal of St Vincent and the Grenadines that an action claiming damages for fraud should be struck out as an abuse of process.  In earlier proceedings in France the bank had alleged that the date on the guarantee on which they were sued had been forged.  This defence had been rejected on appeal in the French proceedings.  The new action in St Vincent was based on the same allegation.  The Privy Council dismissed the bank’s appeal on the basis that it was for the St Vincent courts to control their own process and to decide whether the bank’s attempt to re-open the issue of fraud was an abuse of it.
42.	The English practice was to allow a defendant within the jurisdiction to contest the enforcement of a foreign judgment in England on the ground that it had been obtained by fraud in the foreign court even though that involved going into facts and issues already decided between the parties in the foreign proceedings.  This is the so-called rule in Abouloff v Oppenheimer & Co. (1882) 10 QBD 295 where Lord Coleridge C.J. said (at page 300):
“where a judgment has been obtained by the fraud of a party to a suit in a foreign country, he cannot prevent the question of fraud from being litigated in the courts of this country, when he seeks to enforce the judgment so obtained. The justice of that proposition is obvious: if it were not so, we should have to disregard a well-established rule of law that no man shall take advantage of his own wrong …”
43.	But in House of Spring Gardens Ltd v Waite [1991] 1 QB 241 this Court held that a defendant would be issue estopped if the alleged fraud had been raised and determined in the foreign proceedings and “no newly discovered fraud” was relied on to resist enforcement of the judgment in England: see per Stuart-Smith LJ at page 251.  There is no suggestion, however, in his judgment that by “newly discovered fraud” he meant evidence of fraud which could not have been discovered earlier with reasonable diligence.  So, taking the judgment at face value, there is a difference in practice between the treatment of foreign and English judgments if Lord Templeman is right about the position under English law.  
44.	Lord Templeman’s statement of principle was criticised by Newey J for its reference to the reasonable diligence condition.  This, he said, could not be derived from the judgment in Boswell v Coaks.  But it is consistent with and followed the earlier decision of the House of Lords in Owens Bank Ltd. v Bracco [1992] 2 AC 443 which was another case where the registration of a foreign judgment was challenged on the grounds that it had been obtained by fraud.  In declining to overrule the decision in Abouloff on the basis that the same rules should apply to both English and foreign judgments, Lord Bridge (at page 483) said:
“It is not in dispute that if the loan documents were indeed forgeries and the account given by Nano in his evidence in the court in St. Vincent of the transaction on 31 January 1979 at the Hôtel du Rhône in Geneva was a fabrication, the St. Vincent judgment was obtained by fraud. But it is submitted for the bank that the language of section 9(2)(d) must be construed as qualified by the common law rule that the unsuccessful party who has been sued to judgment is not permitted to challenge that judgment on the ground that it was obtained by fraud unless he is able to prove that fraud by fresh evidence which was not available to him and could not have been discovered with reasonable diligence before the judgment was delivered. Here, it is said, there is no such fresh evidence. This is the rule to be applied in an action brought to set aside an English judgment on the ground that it was obtained by fraud. The rule rests on the principle that there must be finality in litigation which would be defeated if it were open to the unsuccessful party in one action to bring a second action to relitigate the issue determined against him simply on the ground that the opposing party had obtained judgment in the first action by perjured evidence. Your Lordships were taken, in the course of argument, through the many authorities in which this salutary English rule has been developed and applied and which demonstrate the stringency of the criterion which the fresh evidence must satisfy if it is to be admissible to impeach a judgment on the ground of fraud. I do not find it necessary to examine these authorities. The rule they establish is unquestionable and the principle on which they rest is clear. The question at issue in this appeal is whether a defendant who is seeking to resist the enforcement against him of a foreign judgment, either by an action on the foreign judgment at common law or under the statutory machinery for the enforcement of foreign judgments, is placed in the same position as if he were a plaintiff in an action seeking to set aside the judgment of an English court on the ground that it was obtained by fraud and can therefore only rely upon evidence which satisfies the English rule. 
A foreign judgment given by a court of competent jurisdiction over the defendant is treated by the common law as imposing a legal obligation on the judgment debtor which will be enforced in an action on the judgment by an English court in which the defendant will not be permitted to reopen issues of either fact or law which have been decided against him by the foreign court. But this is subject to the special defence that the foreign judgment was obtained by fraud.”
45.	Before I turn to look at the Commonwealth authorities which Newey J followed and which regard the reasonable diligence test to be wrong in principle, I want to conclude my summary of the English authorities by returning to Hunter which was not apparently cited to Newey J and is not discussed in his judgment.  In the Court of Appeal (reported as McIlkenny v Chief Constable of the West Midlands [1980] QB 283) Lord Denning MR (at page 319) drew a distinction between actions to set aside a previous decision on grounds of fraud and a case where a point is re-litigated on the basis of new evidence which could not with due diligence have been produced earlier:
“It has long been recognised that estoppel per rem judicatam or issue estoppel is not an absolute bar to the matter in dispute being tried again. The party concerned can avoid the effect of the previous decision if he can prove the same to have been obtained by fraud or collusion. That was the unanimous opinion of the judges in the Duchess of Kingston's Case, 2 Smith L.C. (13th ed.), pp. 644, 652. To which we can add now that the party concerned can avoid the effect of the previous decision if he can show that a new fact has come to light (which he could not have ascertained before by reasonable diligence) which entirely changes the aspect of the case: see Phosphate Sewage Co. Ltd. v. Molleson (1879) 4 App.Cas. 801, 814, per Earl Cairns L.C. This is a much stricter test than we require when we admit fresh evidence on an appeal. On an appeal (which is a re-hearing) we have said that the fresh evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive: see Ladd v. Marshall [1954] 1 WLR 1489, 1491, and Skone v. Skone [1971] 1 WLR 812, 815. But in order to avoid the effect of an estoppel (when there is no re-hearing) the fresh evidence must, I think, be decisive. It must be such as to show that the previous decision was wrong. Oath against oath will not do. An "important influence on the result" will not do. It must be conclusive.
…
Likewise it seems to me that a previous decision in a civil case - against a man - operates as an estoppel preventing him from challenging it in subsequent proceedings unless he can show that it was obtained by fraud or collusion: or he can adduce fresh evidence (which he could not have obtained by reasonable diligence before) to show conclusively that the previous decision was wrong.”
46.	Mr Wardell relies on the apparent distinction which Lord Denning makes between setting a previous judgment aside for fraud and seeking to re-litigate an issue on the basis of new evidence for his submission that on a proper reading of the English authorities the reasonable diligence condition has no application to a case where fraud is relied on to set aside the earlier decision of the Court.  The condition only comes into play where (as in Phosphate Sewage Co) a new claim is made seeking the same relief but in reliance on fresh evidence which could not have been made available at the first trial.  But both Goff LJ (at page 335) and Sir George Baker (at page 347) rely on the passage I have quoted from the speech of Lord Cairns L.C. in Phosphate Sewage Co as establishing that in order to be able to rely on new evidence as a justification for re-litigating matters already decided by another court of competent jurisdiction it is necessary to satisfy the reasonable diligence condition.  In the House of Lords, as I have already indicated, Lord Diplock approved this as a correct statement of the law. 
47.	Hunter was not of course a case in which the claimant was seeking to rely on evidence of fraud in relation to the earlier decision.  But Phosphate Sewage Co was such a case and Lord Cairns set out the principles to be applied without making any such distinction.  They have subsequently been treated as of general application as the judgments in Hunter indicate.  In these circumstances, it is not surprising that Lord Bridge formulated his summary of the law in Owens Bank Ltd v Bracco in the way that he did.
The Commonwealth authorities
48.	Perhaps the most outspoken critic of Lord Bridge’s speech in Owens Bank Ltd v Bracco has been Handley JA who is also the editor of Spencer Bower and Handley on Res Judicata (4th ed) 2009.  In Toubia v Schwenke (2002) 54 NSWLR 46 he questioned whether Lord Templeman was right to base his statement of the law on Boswell v Coaks and said that Lord Bridge’s speech was obiter in so far as it dealt with the correct test for setting aside a domestic judgment on grounds of fraud.  These dicta were in his view contrary to earlier decisions of the Privy Council and the House of Lords including the Opinion of the Board in Hip Foong Hong v Neotia & Co [1918] AC 888 where Lord Buckmaster said (at page 894):
“In all applications for a new trial the fundamental ground must be that there has been a miscarriage of justice. If no charge of fraud or surprise is brought forward, it is not sufficient to show that there was further evidence that could have been adduced to support the claim of the losing parties; the applicant must go further and show that the evidence was of such a character that it would, so far as can be foreseen, have formed a determining factor in the result. Such considerations do not apply to questions of surprise, and still less to questions of fraud. A judgment that is tainted and affected by fraudulent conduct is tainted throughout, and the whole must fail; but in the present case their Lordships are unable to say that such a case has been established.”
49.	But Handley JA went on to say:
I would not follow the dicta in Owens Bank Ltd v Bracco, Owens Bank Ltd v Etoile Commerciale SA, and the Federal Court even if there was no High Court decision on the point because, with respect, the dicta are contrary to principle and earlier authority. The assumption is that the Court and the losing party were successfully imposed on by the fraud of the successful party, but relief should nevertheless be denied and the judgment allowed to stand because the defrauded party was careless or lacked diligence in the preparation of his case. Contributory negligence is not a defence to an action for fraud whether the relief claimed is rescission or damages. As Brennan J said in Gould v Vaggelas (1985) 157 CLR 215, 252: ‘A knave does not escape liability because he is dealing with a fool.’”
50.	The same view has been taken in Canada on the basis that fraud unravels all: see Canada v Granitile Inc (2008) 302 DLR (4th) 40 at [209] and [303].
51.	Hip Foong Hong was another case in which an application was made to set aside an earlier judgment on the ground that it was obtained by fraud.  The application and the appeal failed because of the quality of the evidence.  
52.	The passage quoted above contains no reference to the due diligence condition but that was not an issue on the appeal.  Authority apart, however, there is clearly a powerful argument that the rule of policy against re-litigation ought to admit of an exception in cases of fraud regardless of whether the due diligence condition is satisfied.  As Newey J put it in the present case:
“37. To my mind, the reasoning in the Australian and Canadian cases is compelling. Finality in litigation is obviously of great importance, but “fraud is a thing apart”. Supposing that a party to a case in which judgment had been given against him could show that his opponent had obtained the judgment entirely on the strength of, say, concocted documentation and perjured evidence, it would strike me as wrong if he could not challenge the judgment even if the fraud could reasonably have been discovered. Were it impossible to impugn the judgment, the winner could presumably have been sent to prison for his fraudulent conduct and yet able to enforce the judgment he had procured by means of it: the judgment could still, in effect, be used to further the fraud.”
53.	The question however, as he recognised, is whether it was open to him as a matter of precedent to dissent from the views expressed in Owens Bank Ltd. v Bracco and the other cases I have referred to.  Newey J took the view that what Lord Bridge said in Bracco was obiter and that there was no other authority binding on him in which the reasonable diligence condition had been held to be part of the test for setting aside a judgment on grounds of fraud.  But other judges at first instance have taken a different view: see Sphere Drake Insurance plc v Orion Insurance Co plc (11 February 1999) (unreported) (Langley J); Kuwait Airways Corp v Iraqi Airways Corp [2003] EWHC 31 (Comm) (David Steel J); Re: Surety Guarantee Consultants Ltd [2010] EWHC 3172 (Ch) (Norris J); Chodiev v Stein [2015] EWHC 1428 (Comm) (Burton J) and, most recently, Ackerman v Thornhill [2017] EWHC 99 (Ch) (Snowden J).
54.	The view taken in all these cases is that the point in issue has been decided authoritatively by the Court of Appeal and House of Lords in Hunter which, although not a case of fraud, expressed the test in general terms in relation to whether an attack on a previous judgment constituted an abuse of process.  As I have endeavoured to explain in this judgment, this is a question of whether the Henderson v Henderson rule of policy admits of an exception when it comes to actions of the kind under consideration on this appeal.  The cases referred to demonstrate that an exception exists but on terms which include the application of the reasonable diligence condition.  The Phosphate Sewage Co case involved an attempt to make a second but identical claim on the basis of new evidence of fraud.  Although this meant that the defence raised was one of res judicata, that makes no difference in my view to the essential policy question which is in issue.  A different result cannot be justified simply on the grounds that one is considering the matter in terms of abuse of process.  The due diligence condition has been applied in Hunter and stated to be the law in Owens Bank Ltd. v Bracco.  So far as this Court is concerned it represents the balance struck by the English authorities between the two policy considerations which are in play and in my view we are obliged to apply it.
55.	For these reasons, I would allow this appeal and remit to Newey J the question whether Mrs Takhar has satisfied the reasonable diligence condition in this case. 
Lady Justice King :
56.	I agree.
Lord Justice Simon :
57.	I also agree.
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